PEST Analysis

Scanning the external macro-environment in which a firm operates. Explanation of PEST Analysis. STEEPLE.

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What is PEST analysis? Description

The PEST analysis is a framework that strategy consultants use to scan the external macro-environment in which a firm operates. PEST is an acronym for the following factors:

Political
Economic
Social
Technological

PEST factors play an important role in the value creation opportunities of a strategy. However they are usually outside the control of the corporation and must normally be considered as either threats or opportunities. Remember macro-economical factors can differ per continent, country or even region, so normally a PEST analysis should be performed per country.

In the table below you find examples of each of these factors.

Political (incl. Legal)

Economic

Social

Technological

Environmental regulations and protection

Economic growth

Income distribution

Government research spending

Tax policies

Interest rates & monetary policies

Demographics, Population growth rates, Age distribution

Industry focus on technological effort

International trade regulations and restrictions

Government spending

Labor / social mobility

New inventions and development

Contract enforcement law

Consumer protection

Unemployment policy

Lifestyle changes

Rate of technology transfer

Employment laws

Taxation

Work/career and leisure attitudes

Entrepreneurial spirit

Life cycle and speed of technological obsolescence

Government organization / attitude

Exchange rates

Education

Energy use and costs

Competition regulation

Inflation rates

Fashion, hypes

(Changes in) Information Technology

Political Stability

Stage of the business cycle

Health consciousness & welfare, feelings on safety

(Changes in) Internet

Safety regulations

Consumer confidence

Living conditions

(Changes in) Mobile Technology

Completing a PEST Analysis is relatively simple, and can be done via workshops using brainstorming techniques. Usage of PEST analysis can vary from: company and strategic planning, marketing planning, business and product development, and research reports.

Variants of PEST Analysis

Sometimes extended forms are used, such as SLEPT Analysis (plus Legal) or the STEEPLE Analysis: Social/demographic, Technological, Economic, Environmental (natural), Political, Legal and Ethical factors. Also Geographical factors may be significant.

PEST Analysis Special Interest Group

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PEST Analysis Forum

Recent User Comments

    			 
              - Thailand
  	       
  		     PEST Analysis is Complementary to SWOT Analysis
  	  		 "PEST is one of the essential tool to supplement the SWOT analysis. PEST is the external environmental analysis in which opportunities and threats derive. Conducting PEST will be useful for SWOT analysis."
  			   
    	  		 0

    			 
  			   Akoto - Ghana
  	       
  		     Other Marketing Environment Tools
  	  		 "Apart from this PEST framework used to analyze the macro environment, which other technigues can be used?"
  			   
    	  		 3

    			 
  			   Gugu - South Africa
  	       
  		     Organisational Analysis
  	  		 "I would be grateful if I could be permitted to refer to the contents on this text. I will acknowledge the source."
  			   
    	  		 2

    			 
              - Nigeria
  	       
  		     Fiscal Policy
  	  		 "Dear Colleagues, please, how can fiscal policy avert economic recession in an already challenged economy like the developing countries and Low and Middle Income Countries (LMIC)?"
  			   
    	  		 5

    			 
  			   Adam Mohammed Baba - Ghana
  	       
  		     Economic Policy Tools
  	  		 "Governments use several economic policy tools to achieve a set of goals. Managers of industry must have their focus on on these policies so as to ensure that their businesses survive. These economic policies include:

a) Fiscal policies,

b) Monetary policies and

c) Supply-side policies.

I think it is important to include Government Policies as a major factor in analysing the macro environment of an industry."
  			   
    	  		 4

Best User Comments

    			   
    			     Leo.liao - China
  	         
  				   Strategy Management
  				   "How can I understand a strategy management applied under different environments"
    			   
        	  		 51

    			   
    			     Mari - EST
  	         
  				   PESTEL
  				   "Alternatively, it could be called PESTEL analysis, which many business courses in universities favour. In Johnson , Scholes and Whittington "Exploring Corporate Strategy" there is a fairly competent outline of PESTEL (Political, Economic, Social, Technological, Environmental and Legal) with examples."
    			   
        	  		 44

    			   
    			     Njeri - Kenya
  	         
  				   PESTLE Critique
  				   "What are some of the criticisms of the PESTEL Analysis?"
    			   
        	  		 33

    			   
    			     blshaw - USA
  	         
  				   POET, variant of PEST
  				   "Because I consult to defense agencies, I've had a hard time getting them to grapple the Societal / Social category in workshops. Even with "seed" examples.   So, I am going to try a variant - I'm going to replace the Societal / Social category with "Organizational" (internal or external).  I can still account for all the elements - most I'll leave in the renamed category - such as "Aging Workforce", a few I'll shift to other categories. More importantly, it may better resonate with my clients.  Wish me luck - I'll let you know in a few weeks. 03-AUG-07"
    			   
        	  		 22

    			   
    			     kojo - Ghana
  	         
  				   Strategy making
  				   "Alternatively, let us call it STEEPLE. To capture the most influential ethical environment which requires a deeper understanding for successful organisational strategy."
    			   
        	  		 17

    			   
    			     Hugo - Spain
  	         
  				   How to use PEST - Application variants
  				   "When you are examining the external environment of a firm through a PEST ANALYSIS, besides the obvious understanding of the CURRENT STATUS of the factors or trends (which ones are they, their current status, history, evidence to backup your findings) you should also look at the INTER-RELATIONSHIPS between trends (dependencies, potential conflicts), TRANSLATE TRENDS TO ISSUES (assess the impact on organization), and try to FORECAST THE FUTURE DIRECTION of the factors. But most importantly, you need to formulate CONCLUSIONS with regards to the impact of the factors on the company, its strategy and its competitors."
    			   
        	  		 14

    			   
    			     Pankaj - India
  	         
  				   System Risk in PEST Analysis
  				   "As per recent global recession, how do you include in PEST analysis the risk factor due to mass negligence of control mechanism in financial sector in developed countries both by Government and public?"
    			   
        	  		 5

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12manage for:

                       
                        ● Ullhas Pagey (India)
                        
                      PEST + SWOT Analysis
                      "A PEST analysis can further be refined by incorporating the SWOT framework for each of the dimension mentioned here, i.e.: P, E, S and T."

                       
                        ● Mr T (UK)
                        
                      Risk per Recession
                      "Under political factors one could add Regulation that was lacking, probably as a potential threat. The likely developments to improve this situation could be an opportunity.

Social factors could be cultural attitudes to risk in specific industries and whether its myopic or looking to the long term."